Another audit critical of Michigan child care program

David Eggert

Tuesday

Jul 29, 2008 at 12:01 AMJul 29, 2008 at 3:42 AM

Michigan potentially made $231 million in improper payments to provide day care for low-income children over 2 1/2 years, according to an audit released Tuesday — the second in a week to criticize the state’s handling of child care.

State Auditor General Thomas McTavish’s report cited one case where a parent was on vacation for all but about one hour during a two-week period, but the state still paid for 100 hours of child care.

Payments with high risk of fraud were flagged. The state paid dead day care providers and made payments on the behalf of dead children.

Michigan potentially made $231 million in improper payments to provide day care for low-income children over 2 1/2 years, according to an audit released Tuesday — the second in a week to criticize the state’s handling of child care.

State Auditor General Thomas McTavish’s report cited one case where a parent was on vacation for all but about one hour during a two-week period, but the state still paid for 100 hours of child care.

Payments with high risk of fraud were flagged. The state paid dead day care providers and made payments on the behalf of dead children.

State officials agreed with auditors’ recommendations and said they’re making improvements.

“We do have a program to resolve this, and we are moving on it,” Michigan Department of Human Services Director Ismael Ahmed said of the audit, which reviewed records dated between October 2003 and March 2006.

The report followed a state audit released last week that found Michigan put thousands of low-income children at risk by authorizing sex offenders and other criminals to provide day care.

About two-thirds of child care assistance for low-income parents goes to relatives who care for the children or aides who work in children’s homes while the rest goes to licensed centers and homes.

The audit said the DHS paid for parents who didn’t demonstrate a verified need for day care assistance. It also faulted the state for having no controls to prevent fraudulent overbillings, to ensure payments were made only to qualified parents and to make sure payments weren’t made to former day care providers who ended up in jail.

After losing staff through early retirement and cuts, the DHS in 2001 began relying on day care providers to bill how many hours they worked. The state automatically paid for those hours. The average payment per child today is $1.68 an hour.

“Looking at it now in hindsight, it clearly did not work,” said Ahmed, who wasn’t the department director seven years ago. The “self-certification” method started under former Gov. John Engler’s administration but has continued under Gov. Jennifer Granholm’s administration with officials putting a higher priority on child abuse and neglect cases.

The state is changing its program in October to also require low-income parents to report how many hours their children are in day care. Then officials will cross-check what providers and parents report.

The audit said the close relationship between parents and providers — often relatives — increases the risk for collusion.

State officials said after reviewing 133 cases in which fraud was a high risk, they terminated services provided by 28 providers. Another 840 providers were terminated or unenrolled for not keeping time and attendance records. The state budget for next fiscal year includes money to hire 20 people to investigate parents’ eligibility and need for aid.
The department also is backing state House-passed bills pending in the Senate that would, among other things, require parents receiving child care subsidies to submit proof of their work or school every three months.

To conduct the audit, officials sampled 58 cases in 13 counties out of 144,179 statewide. Auditors concluded there was a 95 percent probability that improper payments totaled at least $43 million and could have been as high as $402 million.